Biden administration to propose rule to close retirement advice loopholes

The Biden administration is proposing a new rule Tuesday aimed at closing loopholes that create added costs around retirement investment advice.

The announcement, which is part of a broader effort by the White House to address so-called “junk fees,” is focused on addressing potential conflicts of interest among financial advisers who provide retirement advice.

The new Labor Department proposal would require financial advisers to provide retirement advice in the best interest of savers rather than in the interest of a firm pushing a specific investment product, something that the White House said can cost retirees billions of dollars annually.

The White House Council of Economic Advisers (CEA) said in a blog post published Tuesday that financial advisers must hew to a “fiduciary standard” to put their client’s interests above their own commissions when recommending investments.

But the CEA noted that “blind spots in the current rules can increase costs and fees for consumers, taking a toll on their retirement savings.”

The Labor Department proposal would “ensure that retirement advisers must provide advice in the saver’s best interest, regardless of whether they are recommending a security or insurance product and where they are giving advice,” the White House said in a fact sheet.

The proposal would also seek to address a loophole around advisers providing guidance on rolling over assets from a 401(k) plan into an Individual Retirement Plan, the White House said.

Tuesday’s announcement is the latest effort by President Biden and his aides to address what they describe as “junk fees,” which create additional, sometimes unseen costs for Americans.

As part of that effort, the administration has previously announced actions to eliminate banking fees and hidden charges on cable bills, airline tickets and hotel bookings.